Labor-law violations and the kind of economic climate we encourage [The Pump Handle]

Last week, the US District Court for the Eastern District of Texas temporarily enjoined provisions of the Obama Administration’s Fair Pay and Safe Workplaces Executiv Order (EO 13673), which would require companies bidding on federal contracts worth more than $500,000 to report whether or not they have been cited in the last three years for labor law violations. (In their initial bid, they simply have to check a box to say whether or not this is the case.) This temporary stay will be in effect until the court decides the case brought by Associated Builders and Contractors of Southeast Texas et al., which claimed harm to companies that bid on federal contracts.

As Celeste noted last year when Republican Members of Congress complained about this executive order, nothing in the EO or the related guidance document says firms that disclose such citations will be ineligible to bid on federal contracts. Those that move on to the pre-award stage (i.e., are under consideration for the contract) will have to provide additional information, she explained:

If a company disclosed that they have been cited in the last three years for a labor law violation, they would be asked to provide additional information about the violation(s). The additional information would be items such as a copy of the citation, the docket number, the decision that was rendered, and how they corrected the violation. The proposed guidance acknowledges that a company may have contested or challenged a violation. It says: the Administration understands that a company “may raise good-faith disputes” about labor law violations. A firm could submit such information to the government’s contracting official about their rationale for challenging the violation and status of the contest.

Incredibly, under our broken federal procurement system, the government regularly awards contracts to companies with serious violations of worker protection laws. These include a lack of safety protections in poultry processing plants or chemical plants resulting in amputations and worker fatalities; wage theft where companies fail to pay legally required minimum wage rates or overtime; and sexual harassment and employment discrimination.

Even companies with the most egregious violations continue to receive federal contracts. One such company, where four workers were killed in a horrific incident, was recently blasted by officials at the Occupational Safety and Health Administration, who said the workers “would be alive today had their employer taken steps to protect them.”

According to a 2013 U.S. Senate report, almost 30 percent of companies charged with the highest penalties for federal labor law violations are also federal contractors.

An assumption undergirding many US regulations and procurement policies is that we want to support small businesses. Companies are exempt from some requirements or enforcement activities if they’re small, presumably because the potential harm their employees is outweighed by the value to the economy from allowing people to form small businesses. We accept a certain amount of inefficiency in federal procurement – for instance, requiring National Institutes of Health grantees to get multiple bids for new lab equipment rather than just going back to the same company they’ve used before – because we want to give less-established businesses a chance to compete and flourish.

If we’re going to say federal regulations and procurement policies should promote a climate that allows entrepreneurs to build small businesses, I’d like to see us extend that philosophy to allowing businesses with safe workplaces to flourish. There’s an economic as well as ethical rationale for this: occupational injuries and illnesses cost the US billions each year.

The Fifth Circuit may well find that the Fair Pay and Safe Workplaces Executive Order violates existing laws. (Given that District Judge Martha Cone’s injunction contains the statement “it is settled in this circuit that government contractors are entitled to the same First Amendment protections as other citizens,” a judgment against the EO seems likely.) If that’s the outcome, I hope Congress will pass new laws that give as much deference to businesses that respect worker health and safety as we currently give to small businesses.